All of India will be mobile by 2014

Crowded mobile market means trouble for state-backed BSNL

According to analyst outlet iSuppli, wireless and mobile phone subscription in India has grown enormously. Wireless subscriptions are predicted to hit over 97 percent of the country’s 1.26 billion population by 2014. But what does this mean for poor old, state run BSNL?

Around 19 million new wireless subscribers were added each month during the first four months of 2010. Isuppli said by the end of this year, total wireless subscriptions are projected to reach 766.0 million. This is 45.9 percent higher than the 525.1 million subscribers counted at the end of 2009.

Driving the overall growth of wireless subscribers is the expansion of the rural Indian market where entry-level handsets are most popular.

The pace of growth for the future shows little signs of slacking. Subscriber numbers will continue to increase during the next four years, topping the one billion mark by 2012.

The launch of 3G technology in the fourth quarter of 2010 is expected to significantly boost sales in the country. More 3G phones, more interest in 3G.

In the 3G market, the cut-throat infrastructure offers are being made by European vendors and carriers while the Chinese are highlighting their professional services offerings.

Earlier this month we reported that cut throat market conditions plus a weary bunch of mobile operators were forcing network equipment vendors in India to slash their prices after 3G operators tightened their belts. It's a bid to save money after forking out thousands for a piece of India's 3G spectrum.

According to reports in the Business Standard, the Indian government’s plan to list state-run telecom major Bharat Sanchar Nigam Ltd (BSNL) will be delayed due to the company’s mounting losses and high payout for 3G spectrum.

The Department of Telecommunications (DoT) is looking towards a healthy financial situation before going ahead with BSNL’s planned initial public offering (IPO), a senior ministry official told the paper.

BSNL slipped under the financial net due to an unexpectedly high bid price of 3G spectrum.

In August the company posted financial figures showing its first annual loss for 10 years. The state run telecoms company posted a loss of US $178.177 million (Rs 1,823 crore) in 2009-10, compared to the profit of $124.486 million (Rs 575 crore) it showed in 2008-09. It put this down to a decline in revenue from landline services and also moaned it had to pay employees more due to the Sixth Pay Commission for government employees.

Because BSNL’s 3G mobile services have not done well and the company has managed to garner only a small subscriber base, its profits have not yet risen to what India's government is happy with.

Unless the financial performance of BSNL improves, the department is unlikely to go ahead with the listing plans for the telecom PSU.

Backed by the state, it must do as it's told. How BSNL is going to compete with the movers and shakers is anybody's guess.